Legal aspects when buying a business in Bulgaria

Legal aspects in M&A when buying a Bulgarian company

Legal aspects are of high importance when buying a business. Your advisor needs to be up to date with the legal framework that applies to M&A transactions in Bulgaria. Here we mention some aspects that you need to consider when acquiring a company in Bulgaria.

What regulates M&A in Bulgaria?

The mergers (incl. takeovers) and de-mergers (spin-offs and splits) as well as the share transfers and business (going concern) transfers are regulated on a general level by the Commerce Act. A number of other statutes, however, may also affect certain aspects of M&A transactions, including: the Obligations and Contracts Act; the Competition Protection Act; the Ownership Act; and the Labour Code, etc.

Where the target is a public company, the specific rules set down in the Law on public offering of securities (“LPOS”) need to be observed. Takeover bids with respect to public companies are extensively regulated under Regulations No 13/2003, enacted by the Financial Supervision Commission (“FSC”) on the basis of a delegation under LPOS.

Are there special legal rules for foreign buyers in Bulgaria?

As a general rule, investments by foreign entities are governed by the same provisions that are applicable to Bulgarian investors. Therefore, all investor-friendly provisions applicable to Bulgarian companies apply likewise to foreign investors. Furthermore, if an international agreement provides for more favourable provisions towards entities from certain countries, the latter have priority over the local Encouragement of Investments Act (EIA).  Similarly, restrictions on investments also apply on an equal footing to Bulgarian and foreign entities. By way of example, such restrictions apply to companies which are in the process of liquidation or in bankruptcy proceedings.

In accordance with the Commission Regulation (EC) No 1628/2006, there are investment restrictions towards certain sectors – the same indicated in the said Regulation (for production of products in the coal and steel industry, the shipbuilding and synthetic fibres sectors, fisheries and aquaculture). Furthermore, there are investment restrictions for investors from countries which treat Bulgarian investors in a discriminative manner. These countries are listed in the Council of Ministries’ official list.

Please get in touch with us if you want to know more about the legal aspects when buying a company in Bulgaria.